Post-Acquisition Risks: Contingent Liabilities and Failure to Achieve Expected Returns
First written in FY2019. 2 of 5 entries say "Restated". Latest entry: 2026-04-30.
Value Golf moved to the "Worse" side of this theme in 2020, 4 years before the typical company in this theme (2024).
The whole theme swung hardest in 2024: 36 of 89 companies on the "Worse" side.
60 other companies' latest entry also says "Restated".
- 2026-04-30RestatedManagement plan
「The Group regards acquisitions as one of the pillars of its growth strategy and continues to gather and consider information on potential transactions.」
The Company reiterated its policy of making M&A a pillar of its growth strategy and continued to cite contingent liabilities and the risk of underperformance after acquisitions. - FY2024RestatedAnnual report
「Our group may make acquisitions to achieve sustained growth in enterprise value by expanding its business areas. Although we conduct sufficient due diligence on the financial condition, contractual relationships and other aspects of a company before acquiring it, if previously unrecognized contingent liabilities arise after the acquisition, or if the earnings of the subsidiary or other acquired entity fall significantly below expectations, it may become necessary to substantially reduce the carrying amounts of the subsidiary shares and goodwill, which could affect the operating results and financial position of our group.」
On the assumption that business areas will continue to expand through M&A, the risk of reductions caused by contingent liabilities after an acquisition and failure to achieve expected earnings has been reconfirmed. - FY2021MaterialisedAnnual report
「Sankei Travel Co., Ltd. has been underperforming the plan initially prepared due to the impact of COVID-19 and other factors. ... We recognized the entire unamortized balance of the company's goodwill as an impairment loss.」
The subsidiary's failure to meet its post-acquisition earnings targets materialized, and the entire ¥59.409 million of goodwill at Sankei Travel was impaired. - FY2021-Q3WorsenedAnnual report
「Travel demand in Japan and overseas has declined sharply due to the spread of COVID-19, as a result of entry restrictions imposed by countries around the world and requests for people to refrain from going out in Japan. For our group, we have made accounting estimates, including the valuation of goodwill, on the assumption that these conditions would continue through the fourth quarter of the fiscal year ended January 2021 and recover gradually thereafter. There remains considerable uncertainty regarding the impact of the spread of COVID-19 on economic activity, and if the conditions underlying these assumptions change, our group's financial position and operating results could be affected.」
Accounting estimates, including the valuation of goodwill, were made on the assumption of a sharp decline in travel demand, and the potential impact on the financial position and operating results of changes in the recovery assumptions was disclosed. - FY2019First statedAnnual report
「Although we conduct sufficient due diligence on the financial condition, contractual relationships and other aspects of a company before acquiring it, if previously unrecognized contingent liabilities arise after the acquisition, or if the earnings of the subsidiary or other acquired entity fall significantly below expectations, it may become necessary to substantially reduce the carrying amounts of the subsidiary shares and goodwill, which could affect the operating results and financial position of our group.」
As acquisitions expand, the risk of performance being affected by previously unrecognized contingent liabilities after an acquisition and reductions in the carrying amounts of subsidiary shares and goodwill has been added as a new risk.